If you’re thinking about filing bankruptcy, you may have already heard about the “means test.” And if you’ve tried to run the numbers yourself, you might be feeling completely confused.
Because how is it possible that you have little to no income, your bills are overwhelming, you’re barely surviving… and yet the bankruptcy paperwork says you don’t qualify?
It feels backwards. But there are several reasons this happens, and most of them come down to how the means test is calculated.
Let’s break it down.
What Is the Bankruptcy Means Test?
The means test is a formula created to determine whether someone qualifies for a Chapter 7 bankruptcy (the type where most unsecured debt is wiped out), or whether they must file Chapter 13 (a repayment plan).
The goal of the means test is to determine whether you have “disposable income” that could be used to repay creditors.
But here’s the issue:
The means test is not based on your real-life budget.
It’s based on a government formula.
And that formula often doesn’t reflect the way people actually live.
The #1 Reason: The Means Test Uses Your Past Income, Not Your Current Situation
One of the biggest surprises for people is that the means test doesn’t care whether you’re unemployed today.
It looks at your average gross income over the last six months before you file.
That’s called your:
“Current Monthly Income” (CMI)
Even though it sounds like it should mean “current income,” it really means:
Your average income over the past 6 months.
So if you lost your job recently, had a temporary contract, received overtime, or had a strong earning period earlier in the year, your average may still look too high.
Example:
You earned $70,000 annually for the first half of the year but lost your job 2 months ago.
Even though you currently have no income, the means test still calculates your income as if you’re still earning.
That alone can disqualify you on paper.
The #2 Reason: The Means Test Doesn’t Count All Expenses the Way You Think
You might assume that if your expenses are high, the court will just subtract them and see you can’t afford to pay anything.
But the means test does not use your actual expenses in many categories.
Instead, it uses standardized “allowable expenses” created by the IRS.
These include preset limits for:
- Housing and utilities
- Food and household supplies
- Transportation
- Health care
- Clothing
- Personal care
- Miscellaneous essentials
If your real expenses are higher than those limits, the bankruptcy court may say:
“We don’t care. You only get the allowed amount.”
So even if you’re paying $2,500 a month in rent, if the IRS allowance for your county is lower, you may only be able to deduct that lower number.
This creates an artificial “surplus” on paper — even when you’re drowning in real life.
The #3 Reason: Certain Debts Don’t Count as “Expenses” for the Means Test
This one shocks people.
Many of the things draining your bank account every month might not be treated as deductible expenses in the means test, including:
- Credit card payments
- Personal loan payments
- Medical debt payments
- Payday loans
- Collection payments
- Private agreements with creditors
Because bankruptcy assumes those debts will be discharged, they often don’t get treated like valid expenses.
So you may feel like your expenses are sky-high… but the means test may not allow those expenses to be counted.
The #4 Reason: Household Size and Household Income Can Hurt You
Another major issue is household income.
The means test doesn’t just look at your income — it looks at your household income, which may include:
- A spouse (even if they aren’t filing)
- A partner
- Family members contributing to household support
- Other income in the home
Even if your spouse doesn’t pay your personal debts, their income may still be counted in the formula, depending on the circumstances.
This can push you above the median income limit and trigger additional means test calculations.
The #5 Reason: One-Time Payments Can Inflate Your Income
Even if you don’t have a job, you might have received money in the past six months from:
- Unemployment backpay
- A severance package
- A bonus
- A retirement withdrawal
- A lawsuit settlement
- A tax refund
Some of these payments may count as income under the means test formula, even though they aren’t recurring.
So you could be living with no steady income, but the test may still treat you like you have “regular income.”
The #6 Reason: The Means Test Is Based on Gross Income, Not Take-Home Pay
Most people live off net pay — what actually hits their bank account.
But the means test starts with gross income, before deductions like:
- Taxes
- Health insurance
- Retirement contributions
- Wage garnishments
- Union dues
So you may feel like you’re barely surviving, but the test sees a much bigger number.
This can especially affect people who have:
- High tax withholding
- Mandatory retirement contributions
- Child support deductions
- Expensive insurance premiums
The #7 Reason: You May Have Secured Debt That the Test Treats Differently
Mortgage payments and car payments can be deductible — but the means test applies specific rules.
Sometimes, people are paying:
- High car payments
- High mortgage payments
- Loans tied to property they may surrender
But if the paperwork doesn’t properly show whether you’re keeping or surrendering the asset, your deductions may be limited or incorrectly calculated.
This is one of the most technical areas of the test, and mistakes are common.
The #8 Reason: The Means Test Assumes You Can Cut Costs
The bankruptcy system is designed with a built-in assumption that if your expenses are above the “reasonable” standard, you should reduce them.
But in real life, you may not have that option.
For example:
- Your rent may be high because of your local housing market
- Your medical costs may be unavoidable
- You may need childcare in order to work
- Your transportation costs may be high due to commuting or vehicle repairs
- Your utility costs may be inflated due to old housing conditions
Even though these expenses are real and necessary, the means test often treats them as “too high.”
So What Happens If You “Fail” the Means Test?
Here’s the good news:
Failing the means test does NOT automatically mean you can’t file bankruptcy.
It usually means one of three things:
Option 1: You May Still Qualify for Chapter 7 Through Special Circumstances
Even if the numbers don’t look good on paper, there may be additional deductions or legal arguments available based on:
- Medical expenses
- Disability
- Recent job loss
- Reduced hours
- Child support obligations
- Unexpected financial emergencies
This is sometimes referred to as a “special circumstances” argument.
Option 2: You May Need to Wait Before Filing
Sometimes the smartest move is simply to delay filing until your six-month income average drops.
For many people, waiting one or two months can completely change the outcome.
Option 3: Chapter 13 May Still Be a Powerful Option
Chapter 13 has a bad reputation because it involves repayment.
But for many consumers, Chapter 13 can:
- Stop foreclosure
- Stop repossession
- Stop wage garnishment
- Stop lawsuits
- Stop utility shutoffs
- Reduce what you repay unsecured creditors
In some cases, Chapter 13 plans can be surprisingly affordable.
The Bottom Line: The Means Test Isn’t a “Fairness Test”
The means test is not designed to reflect your personal struggle.
It’s a standardized formula that often produces results that feel ridiculous.
So if you’re asking:
“How can I have no income and still not qualify?”
The answer is usually:
Because the means test is based on past income averages and standardized expense limits — not your actual current reality.
If You’re in This Situation, Don’t Give Up
If you’re drowning financially and the means test seems to be blocking you, you are not alone — and you may still have options.
Bankruptcy law is full of technical rules that can dramatically change eligibility depending on timing, household structure, and the type of debt you have.
A proper review by a consumer bankruptcy attorney can often uncover solutions that aren’t obvious from online calculators.
Need Help Figuring Out Why You Don’t Qualify?
At Ginsburg Law Group, we help consumers understand their rights and evaluate whether bankruptcy is the best path forward.
And for more consumer rights resources, visit The Consumer Bar — where we break down legal issues in plain English.
